iDeCo is the individual version of the corporate DC plan, run by the National Pension Fund Association with accounts opened through banks and securities firms. Members choose their contribution and investments. Contributions are deductible in full from taxable income for both income tax and inhabitant tax, investment gains are not taxed while in the plan, and benefits are taxed on withdrawal as retirement income for a lump sum or pension income for an annuity. The trade-off is that the money is locked in until at least 60, with narrow exceptions.
The limits have been tied to what the member's employer provides. From December 2024, an employee whose employer has a corporate pension could contribute up to 55,000 yen a month less the employer's contributions, capped at 20,000 yen, and an employee with no corporate pension up to 23,000 yen. From December 2026, under the 2025 reform, that becomes 62,000 yen a month less any employer contributions for all employees, the self-employed limit rises to 75,000 yen, and a new category lets people contribute until 70 if they have not yet claimed their basic state pension. Small employers with 300 or fewer staff can also add contributions through iDeCo+.
Membership has grown quickly, reaching 3.63 million in March 2025, but remains small next to the workforce.
What it means for a foreign employer
- It is a cheap benefit to support. You need not run iDeCo, but candidates value employers that explain it and, where eligible, use iDeCo+. For a well-paid employee the tax saving is real.
- Your DC contributions reduce the employee's room. From December 2026, the more you contribute to a corporate plan, the less the employee can put into iDeCo. Model both together.
- Senior hires care about the exit rules. The timing of an iDeCo lump sum and a retirement allowance now affects how both are taxed. See taishokukin.
- Foreign staff face a lock-in. As of October 2026, a non-Japanese member who leaves Japan can take an early lump sum only if they are under 60, are not in a corporate DC plan, are not entitled to a DC disability benefit, have contributed for five years or less in total or hold assets of 250,000 yen or less, and claim within two years of losing membership, after they have left. Anyone who has contributed for longer is locked in until 60. Tell them before they enrol.
Sources
- Defined Contribution Pension Act, as amended by the 2025 pension reform act (in force December 2026).
- National Pension Fund Association, iDeCo membership statistics (March 2025).
- Ministry of Health, Labour and Welfare, outline of defined contribution pension changes from December 2024 and December 2026.
- National Pension Fund Association, iDeCo official site, conditions for the early lump-sum withdrawal (dattai ichijikin).